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Latest DTCC CDS Update (Week Of July 31)
Due to popular demand, Zero Hedge is happy to bring back the weekly DTCC CDS gross/net open interest recap. The primary reason we dropped coverage of CDS data over the past month was/is our belief that both fundamental and technical analysis, in the face of a rapturous market is pointless, and the only thing that matters is the ticking sovereign debt timebomb, as indicated by various Federal Reserve disclosures such as the H.4.1, H.3, and Z.1. If you don't believe me, please call any fundamental analyst at either a sell or a buy side firm at 4:00:01 pm. Nine out of ten times you will get voicemail (which, all else equal, is better than a vibrating dildo). Nonetheless, for the sake of completeness, it is useful to see what this formerly very useful data point from the world of CDS indicates: so here is what the latest out of 55 Water street says.
Not surprisngly, mega poundage in financials with almost $100 billion in net rerisking over the past week on just over 13 thousand exchanged contracts. New trades for $344 billion were offset by full terminations of $445 billion - traders couldn't trade this sector fast enough. It is as yet unclear if the motivation was to hedge long equity positions via CDS purchases, or Cash-CDS cap arbitrage. Another squeezed sector was consumer services at $37 billion. The remainder of industries were mostly noise
In single names, rerisking dominated derisking. The most notable non-sovereign derisking names were Arrow Electronics, Banco Espirito Santo, ILFC, ArcerlorMittal, Disney, TCE, Holdings, Target,GMAC, and Glencore.
On the other side, Deutsche Bank was the safest credit in the world in the prior week based on open interest changes, followed by Barclays, DT, GECC, BofA, MS, Unicredit, Rio Tinto, Tyson, Kerr-Mcgee, UBS, Limited, Ford and a bunch of other zombie companies.
Total Gross CDS outstanding was at $26.6 trillion, a far cry from the $60 trillion or so a year ago. This consisted of $15.2 trillion in single names, $8.1 trillion in indices and $3.3 trillion in tranches, all of which were about 85% held by dealers. Non-dealer to non-dealer transactions were minute (About 0.1% of total), so all the hopes of the Agriculture Committee to curb this side of the CDS business might need a bit of a reevaluation.
As always, good luck making heads or tails out of this market in which the only thing that matters is whether or not some SPARC array has accidentally blown a fuse at 9:29:59 am, or whether Sky Net has attained sentient status.
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My question is does there exist any sort of data -- outside what BIS publishes -- regarding Interest Rate Swaps (IRS), another source of trillions in OTC derivatives. I think outstanding amount of IRS actually exceeds CDS.
http://www.marketoracle.co.uk/images/2009/Mar/Rob_Kirby_clip_image004.jpg
The ringmasters of wallstreet are self-destructive by nature. It all boils down to human nature.
These types of people have an unshakable guilt, symptoms of which resurface over and over throughout centuries and millenia. That's why most people hate them - bacause they insist on destroying themselves and everyone/thing around them.
best peek into the speculators sentiiment would be the commitement of traders reports. it doesn't give you the swap data directly, but you can find swaption data which is a perfect(or even better)proxy. www.cftc.gov
And by 'vibrating dildo' do you mean Dennis Kneale?
LOL - shouldn't you be "Anonymous" with that pic by your name?
Posting on any reported number is hazardous and can only be viewed in the category "for what it is worth". The shit only gets deeper the more you dig. We'll never know half the truth about anything. GSEC vibrating Dildo? LOL.
I'm glad it's back TD. Thanks.
Time to refocus.
Is ShankyS above me?
What are the odds? That's the second time that's happened.
LOL confused me for a second - BTW - I want your eclipse with a H in the middle on a t-shirt - would make and awesome OH design in black. Mine is the O shit takeoff of the W bumpersticker.
I have no clue how to follow CDS pricing, derisking, re-risking, etc.
I'm just curious if the "pricing" of these lotto tickets tracks SPY, oil, gold, EUR/USD, on a tick for tick basis.
If so, then they are useless hedging instruments, since they are marching in lockstep like Red Chinese soldiers to the "inflation" or "deflation" theme.
i know i should not only focus on one non-sovereign entity, but the the CDS evaluation for ArcerlorMital is very concerning, taking into observation that ArcerlorMittal is the worlds largest steel producer. If the value of AccelorMittal CDS has gone up by that much, the only possible conclusion is that there is no recovery in sight + AM has its internal labor problems and problems with cutting costs and operation re-definition and restructuring. I have been watching closely at this company for the last couple of months and it has been my main indicator of the size of the economic downturn which has happened, and future economical conditions. It is my belief that metal, utility and oil sectors are main indicators of how the economy is doing, and judging by the recent Q2 earnings reports by all these sectors the picture we are looking is gonna be ugly ass hell when in finally unravels
EDIT:
i know this is old knowledge, and a well known fact about this economy, but i just wanted to put it into perspective and validate it with arguments based in this data ...
Read Fool's Gold by Gillian Tett...all details of Mad Cow disease of shadow banks...
It's not going to unravel folks. Don't sit back waiting for the big avalanche. It won't happen. If there is a 7% drop, like the 4 weeks from mid June to mid July, action will be taken. Think about those 4 weeks, guys. If the computers were all powerful, those 4 weeks would not have happened. I personally believe the computers were reprogrammed in that time frame to let things fall, while spending those 4 weeks orchestrating "analyst expectations" for the upcoming earnings reports that started out with Intel's removal of 1.6billion in EU fines. But I digress. The point is, they don't stand pat. By they I mean the Administration and the Fed. They aren't evil. They are trying to stop deaths in the streets. They will do ANYTHING to stop that. They will fail, but we need to stop waiting for that failure to be a spectacular avalanche. It won't be. It will be gradual and forever.
oh believe me when i say that they are not being altruistic; they do it a) because they " don't want to be the guys who presided over the next Great Depression " or b) they have an employment gig from some big WS bank after they leave office. It has nothing to do with saving the economy, just kicking the can down the road ( god i hate cliches, but this one is so suitable ) ... They have no plan, no vision no nothing, the only thing they have is a leg strong enough ( the FED, GS, the Government, advance technology ) with which they can kick the can ( the economy ) further down the road ( economic cycle, presidential term ) ...
People do not understand what a great revenue economy is.
definitely quote of the day
Robot, are you in the hugh hendry camp that there is only one trade - long or short the dollar. everything else is academic and pedantic.
That is a hard trade to decide, because another round of deleveraging could clobber everything except USD.
Any thoughts from anyone on what may happen if (okay.. "when") the FDIC has to tap into the Fed's $500bn line o' credit? Is the already busy auction schedule prepared for that? Or will the Chinese be pissed at hearing about yet ANOTHER plea for funds?
anyone? bueller? beuller?
i don't think the Chinese will be pissed off, because the funds for FDIC bailout were already allocated and secured. And there is a speculation ( which I'm not found of ) that the FDIC is down to their last 800 mil. So, one can expect the Sheila will need to go down on her knees and say pretty please, and then will she get the money she needs. Just imagine if the FDIC does not get a bailout, there would be a run on the banks not seen since the great depression, and all the foreign capital would leave in minutes and the Dow would go to 200 and SPX to 2 ..
I didn't realize the funds were already allocated and secured - I thought it was kept safely behind glass with a small hammer and a 'break in case of emergency' sign on it. Doubt after all we've seen the Gubbmint (the real one, not me) would let the FDIC dangle given everything else they've done to keep this crazy party going. The name of the game is 'convince everyone that the U.S. is okay'.. at all costs.
Failure is not an option until its an inevitability..
well, it has not been announced publicly, but you can bet your house and your wife/husband that those funds are allocated and secured. in this case the Gubbmint ( not you ) will not risk anything, let alone something so systemically important as FDIC
Well, I pretty sure that when one fuses a vibrating dildo with a body of T-100, it's first words would be: "Try SELLING some hope for a chance..."
What a fuzzball of complexity. It must be nice to be able to just make shit up as you go.
Here
Come
The
Pain
Let's make a couple of points.
1) Equity markets were thrown in the dumpster worldwide in 2008 and for the beginning of 2009
2) It is no country's interest to have failure in the equity markets. China already had its civil unrest. Japan's exports are in the toilet. The European market if fraught with the same problems as the U.S., housing is shit, credit is being pulled out of the system consumer spending is also bad. The middle east region is suffering via less oil sales and again real estate (in Dubai as an example). And our markets, on multiple levels, are toast.
These are all facts.
Why wouldn't the world governments try to pump up equity markets, in the end it solves the potential problems of social unrest and economic collapse. Oh, and please don't tell me about the capital markets being free. Beyond distortions in the bond markets via quantitative easing, zero interest rate money via the fed discount window for the banks to leverage up at zero risk to them, and secondaries that dilute the shareholders and still levitate towards a premium immediately after issuance THERE ARE NO FREE MARKETS. It isn't a point for discussion.
Now, I know the fundamentals. I agree they are total shit. However, there is some reason that equity markets have broken through every line of resistance technically. That doesn't mean it can't end, but signals that were formed for over 70 years are saying that this is a bull market (I don't agree fundamentally). That's not my opinion, that is history. Once again, I don't agree with it, but it is what it is... until it ain't.
Does this all have to do with the government telling all the banks and insurance comapanies (can you say Citi and AIG and _____) to move their stock holdings from type II to type I to lessen a shortable float? Possible (feels more probable though).
In the end, company specific risk has been replaced with a government backing. What type of premium does that deserve? Would the government allow companies like CAT (or just fill in any large multinational headquartered here) to fail? Ask yourself that question.
And that is why the market trades parabolic. There is no failure allowed. There is very little risk in the system that isn't backed by the government. Why do you think CRE went through the roof today? The markets are saying, "YOU WILL NOT LET THEM FAIL."
So until this market starts trading on the fundamentals, and the government extricates itself from the markets... The markets will pay the premium not to the risk takers, but to the risk-less.
So, this market has taught me 2 things:
1) Price is the only thing that pays
2) Don't short it unless you see the turn, and be prepared to cover immediately.
There is no historical precedent for the amount of de-leveraging we are experiencing and bound to experience as the US consumer taps out after decades of profligance.
It's either progressive debt monetization or complete system rehaul or partial default from here on in.
>>
Now, I know the fundamentals. I agree they are total shit. However, there is some reason that equity markets have broken through every line of resistance technically. That doesn't mean it can't end, but signals that were formed for over 70 years are saying that this is a bull market (I don't agree fundamentally). That's not my opinion, that is history. Once again, I don't agree with it, but it is what it is... until it ain't.
>>
No, you have gone in two different directions here, and you're not to be blamed for it because it's so easy do it. This is new territory. It's not the stock market that has existed in history. Those 70 year signals mean nothing. There has never been millisecond trading with liquidity rebates in the past. Ever. There has never been government funded intervention of this sort in the past. All Market Technicians Have To Throw Out Their Charts. The challenge here is not to the validity of the charting concept. It is to the absence of a database. There are no historical patterns. There is no history. This is not a stock market anymore. It is something else. No database of chart patterns exists for it. You cannot sit back and say yes, it's different this time and then use charts. That is inconsistent and illogical.
Any one know why Arrow Electronics was featured so prevalently here?????